Export Restrictions and Price Insulation During Commodity Price Booms

By Will Martin, K. Anderson. 2011

407 citations recorded by the source corpus.

For individual countries, variable trade barriers can be used to reduce the volatility of domestic relative to world prices. If this is done by countries accounting for a large share of the market, its effect is offset by increases in world price volatility. This study shows the nature of the resulting collective action problem, with the policy being ineffective on average in stabilizing domestic prices while increasing the volatility of the income transfers from terms-of-trade changes. A simple approach to assessing the contribution of insulation to the price increases is developed and used with new estimates of agricultural distortions to assess its contribution to the price spikes in 1972-74 and 2006-08 for rice and wheat. The analysis suggests that 45 percent of the increase in rice prices in 2006-08, and 30 percent of the increase in wheat prices, was due to insulating behavior. One sign of progress since 1972-74 was a substantial reduction in the extent of price-insulating behavior by the industrial countries. This provides little stabilizing benefit in the rice market because countries not classifying themselves at the World Trade Organization as developing account for only 3 percent of world rice consumption. But it does offer some benefit for the wheat market where non-developing countries account for 27 percent of consumption.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/81366a4fa5f93b69b282f943ed1f7452167cbdd8

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Citations in the corpus

Teleconnected food supply shocks (2016, background): “…since trade flows have become less reliable in past years and exporting countries often applied restricting trade policies to stabilize their domestic supply at the expense of world market supply (Headey and Fan 2008, Martin and Anderson 2012, Fellmann et al 2014, Jensen andAnderson 2014).”
Food insecurity and conflict dynamics - Causal linkages and Complex feedbacks* (2013, background): “Export bans may have pushed world rice and wheat prices up by 35 and 25 percent during the 2007–08 crisis, respectively (Timmer 2010, Martin and Anderson 2011).”
Trade Barrier Volatility and Agricultural Price Stabilization (2012, background): “As mentioned in Section 2 above, such an outcome is shown by Martin and Anderson (2011) to indeed be possible when food-exporting and food-importing countries both alter their trade restrictions in offsetting ways when prices move away from trend.”
Optimal Food Price Stabilization in a Small Open Developing Country (2015, positive): “If all trading countries apply this policy, the collective-action problem may reach the point where individual countries’ efforts to insulate themselves from high world prices cancel each other out (Martin and Anderson, 2012).”
The Economics of Grain Price Volatility (2011, background): “Measures motivated by heightened concern about food security can be very costly, and often are ineffective or even exacerbate the problem (Tangermann 2011; Anderson and Martin, 2011).”
Food Price Volatility and Its Implications for Food Security and Policy (2016, background): “A host of authors (Yang et al. 2008; Headey 2011; Martin and Anderson 2012) have shown that a sequence of export restrictions and bans implemented by countries such as India, Thailand, China, and Russia caused panics in international markets and exacerbated price increases.”
Commodity Booms and Busts (2011, background): “Martin & Anderson (2011) find that from 2005–2008 approximately 30% of the jump in rice prices and 25% of the rise in wheat prices were due to border controls aimed to stabilize domestic prices.”
Estimating the Short-Run Poverty Impacts of the 2010-11 Surge in Food Prices (2011, background): “As Martin and Anderson (2011) point out, if all countries attempt to insulate through trade policies to the same degree, the policy of insulation is completely ineffective—domestic prices are exactly as volatile as they would have been in the absence of insulation.”
Drivers and triggers of international food price spikes and volatility (2014, background): “A host of authors (Yang et al. 2008; Headey 2011; Martin and Anderson 2012) have shown that a sequence of export restrictions and bans implemented by countries such as India, Thailand, China, and Russia caused panics in international markets and exacerbated price increases.”
Do Oil Price Increases Cause Higher Food Prices (2014, positive): “Martin and Anderson (2012), for example, stress that trade barriers intended to shield poor countries from fluctuations in food commodity prices may in fact have magnified the international price instability associated with exogenous shocks.”